Upon completion of the 2022 Legislative Session, here are some of the legislative priorities we’ve been able to pass, defeat, or continue to work on.
Following Passage of an Income Tax Cut and New Revenue, Legislative Leaders Look to Continue Tax Cuts in 2023
In February, SB 59 (McCay), which lowered the income tax rate from 4.95% to 4.85% passed the Legislature and has already been signed by the governor. In addition, the legislation creates an earned income tax credit for low income Utahns.
It also increases the income threshold to qualify for the social security income tax credit for individuals and those filing jointly. The bill increased the threshold for those married and filing jointly from $50,000 to $62,000.
With that said, there is already discussion of an income tax cut for the 2023 Session. During a February Executive Appropriations Committee meeting, it was announced that Utah had $205 million in new ongoing revenue to spend. With the Legislature passing the largest budget in Utah’s history, there should be room for additional relief to taxpayers.
Your Taxpayers Association will continue to urge the legislature to provide a substantial and meaningful income tax cut for all of Utah’s taxpayers, while still maintaining full funding for public education and other necessary government functions.
Keeping the Automatic Increase for Statewide Property Taxes
Back in 2018, the Legislature passed HB 293, which made some pretty substantial changes to the way education is funded.
HB293 put in place an automatic, statewide increase in property taxes by “freezing” the tax rate for the statewide basic levy. By freezing the rate, as property values increase, the amount of revenue the state collects also increases.
This freeze was originally expected to generate $125 million over the five years it was in place. However, due to substantial and unprecedented property value increase, that amount will more than double, to $271 million.
Because of Utah’s lauded and unique property tax law, this means that even when the freeze ends, taxpayers will still be on the hook for the $271 million in perpetuity.
HB 478 (Last), takes into account the startling amount of revenue and wanted to remove the freeze, therefore stopping another year of the automatic increase as property values rise.
While passing the House, all progress immediately stopped in Senate, who refused to even hear the bill or bring it up for debate.
This lack of Senate action means taxpayers can expect yet another year of property tax increases in the range of $35 – 50 million.
Expanding the Available Money Used to Fund Public Education
While there was no specific legislation drafted this year, discussions have been happening with interested parties, including your Taxpayers Association, to eliminate the constitutional earmark on the income tax.
Utah is the only state that separates its income tax (individual and corporate) from the remainder of its revenue and uses it primarily to fund education. Other uses for the income tax can include helping those with disabilities, including children.
By eliminating the earmark, funding for both education and general fund uses can expand dramatically and are no longer limited due to their funding source.
Utah has seen exponential growth in its income tax over the past few fiscal years. Utah’s individual income tax has grown to $6.1 billion from $3.9 billion in 2020. That more than $2 billion must, according to the constitution, be used only for education. This puts a strain on general fund expenses, which can lead to increased sales taxes, fees and property taxes.
By opening up the earmark, money can flow freely to fund education and other priority items, such as public safety and transportation.
In addition, discussions regarding the earmark have also included removing the state portion of the sales tax on food. It is likely these two items will be tied together.
Right now, it is too early to outline specifics of the plan and what it could entail, but the conversation will continue throughout the year and into next year. Your Taxpayers Association is monitoring this proposal very closely and will be actively engaged to ensure taxpayers are protected.
Lowering the Taxes and Fees on Users Cell Phone Bills
Utah has the 8th highest wireless state and local taxes and fees in the nation, with 16.15% of a user’s total bill being state and local imposed taxes and fees.
SB 147 (Harper) lowers fees on cell phone bills, eventually. Currently, users pay the radio network charge of $0.52 per month. Beginning in January of 2025, the fee will be reduced to $0.27.
Many of these cell phone taxes and fees are used to fund public safety. However, like other public safety expenditures, they ought to be funded from the general fund, and not through a direct fee and earmark on cell phone users.
With Utah taxpayers being on the hook for some of the highest cell phone taxes and fees in the country, this is a welcome change.
As Property Values Rise, Providing Relief for Senior Citizens
As an Association, we regularly hear from seniors who are concerned about losing their homes as their values and property taxes increase. In some circumstances, they are being taxed out of their homes.
The Legislature has passed SB 25 (Fillmore) that will help address this issue. Under the bill, eligible homeowners will be able to defer, or hold off paying property taxes until a title transfer.
At that point, the taxes would be due with interest. All taxing entities, under a deferral, are held harmless and would still be able to collect the revenue.
There is $8 million of state funding to keep local governmental entities harmless while the program begins operation.
The bill was defeated in 2021, but following months of negotiations with interested parties, an agreement has been made. We expect this program to help those most in need from rising property taxes.
Ending the Subsidization of Electric Vehicles by Funding Roads More Equitably through the Road Usage Charge Program
While gas-powered vehicle drivers pay an average of $380 per year in gas tax, electric vehicle drivers only pay $120 per year in additional registration fees to cover their usage of the roads.
Bringing alternative-fueled vehicles closer to parity is a goal of the Association, and fortunately, HB 186 (Ward) successfully passed the Legislature. This bill will eventually bring this discrepancy closer to an end. These actions are necessary in order to avoid a road funding crisis as the gas tax plateaus and electric vehicles become more popular.
HB 186, provides two different tracks to address this problem. First, it slowly steps up the registration fees electric vehicles drivers pay in lieu of the gas tax over the next 10 years with increases in 2023, 2026 and 2032.
Second, it lowers the cents per mile charge RUC (Road Usage Charge) users pay to 1.0 cents until 2026 when it will go to 1.25 cents and then in 2032 it will be 1.5 cents. The RUC is a program that has participating drivers pay per mile driven in the state, as an eventual replacement for the gas tax. Right now, it only applies to drivers of electric vehicles.
This will provide more financial motivation for drivers to enroll in the RUC program since they can possibly pay less than the annual fee with more mileage allowed.
SB 200 – Providing Taxpayers Transparency in Statewide Property Tax Increases
Following the passage of HB 293 (2018), property taxpayers have seen an increase each and every year because of a freeze in the statewide basic rate.
The statewide basic rate was frozen at that time, which means that when property values increase, the state collects additional revenue.
Currently, on the property tax notice, the statewide basic rate is displayed as the difference in dollar amounts. However, unlike other property tax levies, such as a school district or city rate, the statewide basic rate is not shown as growing as a percentage.
SB 200 (Harper) fixes this and provides taxpayers with much needed transparency when reviewing their property tax notices.
Multiple Costly “Double Dipping” Bills Shot Down in the Senate
Back in 2010, Utah enacted several reforms on the state retirement system to shore up the fiscal health of the system and prevent costly abuses including “double dipping”. A slew of bills seeking to chip away at those restrictions surfaced during the 2022 session. HB 12, HB 61, HB 348, and HB 460 all sought to pass exceptions to those rules for various groups of state retirement plan participants.
Once all of these bills made it to either the Senate Business and Labor Committee or the Senate Revenue and Taxation committee, they were all shot down. Recognizing that all of these bills have a cost that is borne by taxing entities and their taxpayers, Senators instead favored studying the retirement system over the interim in order to craft the right policy. The Utah Taxpayers Association will continue to monitor all of these efforts.
Eliminating Sales Taxes on Business Inputs – Oil, Gas, and Electrical Generation
Utah’s past legislatures have made a concerted effort for over two decades to remove sales taxes on business inputs, or what is required by a business to make a final product.
Your Taxpayers Association has strongly supported the use of sales tax exemptions in order to avoid tax pyramiding, which has helped establish Utah as the state with the best economic outlook for 13 years running, according to ALEC’s Rich States Poor States annual ranking.
However, Utah still imposes punitive sales taxes several industries, including oil and gas extraction and some electrical generation facilities.
HB 156 would have provided this important exemption (state impact only) to oil and gas extraction operations. By providing this exemption, oil and gas producers have more capital to use to produce more in Utah, with higher production leading to a greater supply of necessary fuel.
Utah has a history of eliminating sales taxes on business inputs. For example, passage of the 1995 manufacturing sales tax exemption ensured the Micron’s initial investment of more than $1 billion in Lehi. The “three-year-life” manufacturing exemption legislation in 2018 ensures that Utah manufacturers continue to provide jobs for Utah families.
The Association is strongly supportive of continuing this longstanding policy to provide strong growth and economic prosperity for those areas in Utah that desperately need attention.
Additional Personal Property Tax Relief for Small Businesses
During the 2021 session, the exemption from personal property tax was raised from $15,000 to $25,000, providing relief from this burdensome tax to more than 30,000 additional small businesses in Utah. HB 199, run by Representative Robert Spendlove during the 2022 session, provides additional relief by shortening the time period those that are exempt need to file a return. The bill shortens the time from five years to one, saving taxpayers the hassle of having to file well after the time they are exempt.
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